Meta’s shares fell more than 26% to $237.76 in afternoon trading Thursday, lopping more than $230 billion off the company’s overall value, or market capitalization. into a virtual reality - actually, make that “metaverse-based” - company. users on its flagship platform.Īt the same time, it invested more than $10 billion in CEO Mark Zuckerberg's ambitious plan to transform Meta Platforms Inc. Shares of the company formerly known as Facebook saw a historic plunge Thursday after the social media giant reported a rare profit decline due to a sharp rise in expenses, shaky ad revenue growth, competition from TikTok and fewer daily U.S. Meta is early in monetizing Reels with ads, but it is following the same playbook Zuckerberg used to successfully copy Snapchat’s Stories feature.Meta is putting a lot of virtual eggs - and billions of dollars - into the metaverse basket, and Wall Street is pretty anxious about it. He said Wednesday that the company’s short-form video product, Reels, accounted for 20 percent of time spent on Instagram, and that video consumption was already more than half the time spent on Facebook. It’s clear that, in the short term, Zuckerberg believes that copying TikTok will revive its growth. Combined with the rise of TikTok, brand safety concerns, and a shift in social media user behavior, there’s a perfect storm heading straight for Meta’s ad revenues.” “Facebook, of course, is no stranger to obstacles, but the iOS changes are the first direct threat to its ad business. “Meta’s ad business continues to face some very real challenges,” said Jasmine Enberg, a principal analyst at Insider Intelligence. With expectations already set low by Wall Street, Meta’s stock price shot up more than 15 percent after it reported better-than-expected earnings per share in the first quarter. After reporting its first-ever drop in daily users for the fourth quarter of 2021, the blue app managed to grow daily users by just 4 percent to 1.96 billion last quarter, while daily users across Instagram, WhatsApp, and Facebook ticked up slightly from 2.82 billion to 2.87 billion. Meanwhile, regulators have blocked Zuckerberg’s ability to make big, transformative acquisitions in social media that could jumpstart growth again.įacebook is still growing, but slower than ever. And Apple’s ad tracking changes have already cost Meta more than $10 billion in lost revenue. TikTok is eating into time spent on both Facebook and Instagram. But the timing couldn’t have been worse: Facebook is growing slower than ever, thanks in large part to younger users fleeing the service. If his core business of ad-driven social media was growing like it was in years past, investors might have responded positively to the Meta pivot. That was when Zuckerberg revealed he was already spending $10 billion a year on Reality Labs, and that he expected the investment to grow despite not seeing a return until at least the latter half of this decade. In the case of Meta, its price has plummeted nearly 50 percent, evaporating the last five years of growth, since it rebranded from Facebook last October. The problem is that Meta’s investors are uncomfortable right now with that level of spending, especially when the payoff is years away. The Reality Labs division of Meta, which makes the Quest VR headset and future AR glasses, has about 17,000 employees and lost almost $3 billion last quarter alone.
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Make no mistake: Zuckerberg is still spending billions a year on building devices and software for the metaverse, a concept he thinks will eventually be as big as the mobile internet. Its target expense range for 2022 was lowered by $3 billion. Revenue rose 7 percent to $27.9 billion, the slowest growth rate since the company went public a decade ago. Meta’s profits for the first quarter were $7.5 billion, down 21 percent from the year-ago period. Meta will “slow the pace of some of our investments” due to “our current business growth levels,” Zuckerberg said during the company’s first-quarter earnings call Wednesday. Now that his company’s stock price has been hammered in recent months, he is dialing back that rhetoric. Mark Zuckerberg told the world last October that he was all in on the metaverse, and that the endeavor that would only get more expensive over time.
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